Optimism over US-China talks and Brexit has its negative side, Africa may just have to pay for it except it stands firm like Mexico.
European shares have remained steady, while stocks in Asia are showing some frenzies amid increasing optimism over potential progress in US-China trade negotiations. Yes, that sounds nice to Bretton Woods but there's a caveat, who's going to pay for it? That's definitely not Mexico at least, not for Trump's border wall.
The “very productive” trade talks puts China at risk and that's bad news for African economies which has over the past decade relied on the Yen, culminating in debt estimated to be in the region of $150 billion across the continent. Celebrating over a consensus is too early, since both countries are going to shift the effect of their compromise on imports. Chinese manufacturers will most definitely be compelled to trade with the US Dollars as a matter of necessity without being mindful of currency swap deals. China plays it rough in the global market. It should never be trusted.
The more likely scenario at this point is that both sides could agree to another extension on the previous truce, or that there is an extension to the March deadline for new China tariffs.
The Dollar weakness could happen in the near term, as political risk in the United States, disappointing domestic data and speculation of a pause in US monetary tightening decrease the Dollar’s competitive advantage against its major peers.
Investors should fasten their seat belts and prepare for a rocky ride on the British Pound, as Theresa May heads back to Brussels this week for more Brexit talks. With the European Union repeatedly stating that the Withdrawal Agreement is not open for renegotiations, May risks flying back home empty-handed. With Europe against her, the strategy of the UK over the course of history, is premised on single handed territorial advancement. It will have to look elsewhere for emerging markets and Africa offers a bunch.
The Pound has interestingly being stable but volatile despite several Labour MP’s resigning over the Brexit drama. Traders are becoming increasingly unconcerned with the endless political drama in the Commons, with some complacency over Brexit possibly seeping in.
The Pound seems to be supported by expectations over the government extending Article 50 in an effort to prevent a no-deal Brexit.
The question is, can African countries decide collectively to halt the impending backlash of the top market players? A plundering might just occur and the very best of Africa, including its buzzing startups may find it difficult to survive and advance for international reckoning. Let's have Africa Talks.
Header Image Credit: CNN.com
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